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Water glut stalls BC Hydro production

Independents keep busy while Crown corp. waits for summer

After a bumper year for precipitation in the Pacific Northwest, BC Hydro stations around British Columbia are sitting idle while independent power producers run flat out. There’s so much water available for hydroelectric power that a Washington-Oregon utility, which runs full-time to protect salmon and trout, is paying other utilities to take electricity off its hands.

Photograph by: Ian Smith
, PNG

After a bumper year for precipitation in the Pacific Northwest, BC Hydro stations around British Columbia are sitting idle while independent power producers run flat out.

There’s so much water available for hydroelectric power that a Washington-Oregon utility, which runs full-time to protect salmon and trout, is paying other utilities to take electricity off its hands.

That means bargain-priced import electricity is available to BC Hydro from the Bonneville Power Authority, but it’s a bittersweet opportunity.

It’s difficult for BC Hydro to tap into the cheap power because of contractual obligations to purchase power from about 75 independent power producers (IPPs). Hydro is forced to buy from IPP operators, including big industrial ones such as Rio Tinto Alcan and Teck Resources, even as its own generation stations wait on standby. For example, at Peace Canyon generating station downstream of W.A.C. Bennett Dam on the Peace River, the primary source of hydroelectricity for all of B.C., the turbines are sitting idle for the first time in a decade.

Prices paid to IPPs vary by season, from an average winter high of $100 to a springtime low of about $60. By contrast, the Bonneville price in recent weeks has averaged less than $20 US.

Overall, according to Hydro’s 2011-12 annual report, IPPs earned $676 million from Hydro in the 12-month period ending March 31 ­— at a price per megawatt of power that was more than twice the cost of imported electricity during the same period of time

The water is pouring in just as warmer spring temperatures push down electricity demand. Data this week from the U.S. Energy Information Agency shows Oregon with 172 per cent of its long-term average precipitation supply, and B.C. with 131 per cent.

Meanwhile, a continuing U.S. economic recession is curtailing industrial power requirements south of the border.

That means there’s no market for B.C. electricity exports to the U.S. Nor do B.C. residents need Hydro to crank up domestic production.

B.C.’s IPP community includes wind, large industrial hydro and gas-fired generation — but most operations are small-scale run of river hydroelectric installations.

The textbook case is the watershed of the Squamish River system.

Hydro is taking a pass on all the water running into its Daisy Lake reservoir near Whistler. Instead of diverting the water from Daisy via pipeline to a BC Hydro generating station on the Squamish, the Crown corporation is allowing the water to flow directly downstream into the Cheakamus River.

Meanwhile, on two other Squamish River tributaries, the Ashlu and the Mamquam, Hydro is paying IPPs to generate power for the British Columbia electricity grid.

“Some years you might have a low water year and if the weather conspires and you have a really big heat wave just at the time of snowmelt and [electricity demand] dropping, you might have a few days or a few weeks when you still have too much water,” Hydro director of resource generation management Renata Kurschner said in an interview.

Kurschner said inflows to Hydro’s reservoirs are only now “starting to pick up” and the utility wants to make sure it’s prepared to absorb even greater flows to come.

“Every year behaves quite differently and that is something you cannot incorporate easily into the long-term contracts. It’s the long-term balancing versus the short-term dealing with whatever Mother Nature brings your way.”

Not everyone is pleased about the situation — critics of British Columbia’s mix of public and private power facilities say it’s the result of poor utility planning and government meddling.

“IPPs require minimum [payments] in their contracts in order that they can show the bank a minimum revenue stream — in order that they can get financing. So Hydro is more or less forced to accept minimum pay provisions on those contracts” said Richard Stout, executive director of the Association of Major Power Customers of B.C.

“Hydro has to spill for the safety of its dams and it probably will end up spilling more because of its minimum take provisions with IPPs. They have contracts that specify that essentially they have to take IPP power first.”

It would be cheaper and more prudent in the long run, Stout said, for B.C. to shift away from hydro- and wind-based IPPs and instead support development of natural gas-fired generation projects.

Others describe the situation simply as the cost of energy security. David Austin, a lawyer with expertise on IPPs and BC Hydro policy, noted that last year in an overheated Alberta electricity market, prices shot above $1,000 per megawatt ­­— more than 20 times Hydro’s average production cost — because of lack of access to surplus power supply.

Without even greater expansion of the province’s generation capacity, B.C.’s economy could stall at a time of great opportunity for growth in mining and natural gas development, Austin warned.

“We don’t want to find ourselves in the position that Alberta finds itself in. If you do, there are serious problems for the economy, and all users of electricity,” Austin said. “If we find ourselves in a situation where we don’t have enough electricity we are all going to suffer.”

Austin said the solution to Hydro’s problem is expansion of inter-regional transmission lines to move the power around to a broader array of potential markets. California, for example, is always looking for opportunities to purchase power — but BC Hydro has no way to deliver more of it to the state.

After a bumper year for precipitation in the Pacific Northwest, BC Hydro stations around British Columbia are sitting idle while independent power producers run flat out. There’s so much water available for hydroelectric power that a Washington-Oregon utility, which runs full-time to protect salmon and trout, is paying other utilities to take electricity off its hands.

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